BP Selling Texas City Refinery for $2.5 Billion

BP has agreed to sell the refinery where a March 2005 explosion killed 15 workers and triggered record OSHA fines. Marathon Petroleum Corporation will buy it and part of BP's retail and logistics network in the southeastern United States.

Oct 08, 2012

BP gained a reputation for repeatedly allowing poor process safety practices at its Texas City, Texas, refinery outside Houston, and now the company is selling it. BP announced Oct. 8 that has agreed to sell the refinery and part of its retail and logistics network in the southeastern United States to Marathon Petroleum Corporation for $2.5 billion.

The worst incident at the refinery occurred in March 2005, when an explosion killed 15 workers and injured 170 others. OSHA fined BP a then-record $21 million and four years later followed up with 270 failure-to-abate notices. The energy company agreed to a settlement in 2010 calling for it to pay $50.6 million to resolve those notices.

BP Products North America Inc. also agreed to pay $13 million in July 2012 to settle 409 willful process safety violations filed by OSHA in October 2009 related to the refinery, and it agreed to pay a $15 million fine in October 2010 for Clean Air Act violations found in inspections after the 2005 explosion. At the time, it was a record civil penalty for Clean Air Act violations at a single facility, EPA announced.

BP acquired the refinery when it merged with Amoco in 1998. It currently employs some 2,150 BP staffers and from 1,000 to 3,000 contract personnel daily, according to BP.

"Today's announcement is the second major milestone in the strategic refocusing of our U.S. fuels business," Iain Conn, chief executive of BP's global refining and marketing business, as the sale to Marathon Petroleum was announced. "Together with the sale of our Carson, California refinery, announced in August, the divestment of Texas City will allow us to focus BP's U.S. fuels investments on our three northern refineries, which are crude feedstock advantaged, and their associated marketing businesses. Marathon Petroleum is a highly respected refiner and marketer. Their ability to take on the responsibilities of this large and complex refinery will be good for the long-term future of the business and its employees. Although largely a merchant refinery, we have decided to also sell certain terminals and marketing assets in the southeast U.S."

BP said the agreement raises the total value of divestments it has agreed since the beginning of 2010 beyond $35 billion, and this total is expected to reach $38 billion by the end of 2013.

The sale is subject to regulatory and other approvals and should close by early 2013, according to BP's announcement, which said Marathon Petroleum will buy the 475,000 barrels-per-day refinery, associated natural gas liquids pipelines, and four marketing terminals in the Southeast. BP will also assign certain branded jobber contracts supplying approximately 1,200 retail sites in Tennessee, Mississippi, Alabama, and Florida that could be supplied by the refinery. BP anticipates the transaction will close by early 2013.

"During the past several years, the Texas City Refinery has been transformed through a resolute focus on safe, compliant, and reliable operations and in recent months has returned to profitability. It does not, however, fit with the long-term strategic direction of BP's global refining portfolio," said Keith Casey, manager of the Texas City refinery. "I believe today's announcement is good for our workers, good for our community, and positions the refinery to achieve its full potential over the long term as part of one of the leading refiner-marketers in the U.S."

BP's three northern U.S. refineries are located in northwest Indiana, Washington state, and near Toledo, Ohio.